On April 26, the Standing Committee of the National People’s Congress of the Chinese Communist Party passed the “Customs Law,” which will be implemented starting from December 1, 2024. The authorities stated that the purpose is to “maintain the basic stability of the current tariff system and overall level of tax burden.” They also claimed that this is a concrete manifestation of implementing the principle of tax collection by law. Currently, China has 18 types of taxes, with 13 of them being legislated, while the remaining 5 are awaiting legislation.
Foreign media outlets like Nikkei Asia believe that at a time when China faces industrial overcapacity and escalating tensions with its trading partners (such as the EU launching investigations into Chinese electric vehicles last October and then targeting Chinese wind turbine production in April this year), the introduction of the “Customs Law” by the CCP is seen as a new weapon in its trade policy arsenal. It is meant to deter other countries from imposing tariffs on Chinese goods through tariff retaliation.
Despite the CCP’s history of using tariffs as a weapon over the years, the introduction of the “Customs Law” now provides them with a more formal justification for their actions.
However, the decision to engage in a tariff war and how it is conducted ultimately depends on the strength of the conflicting parties. For example, since 2018, the Trump administration has been in a tariff war with China, imposing tariffs on around $370 billion worth of Chinese exports to the US, effectively ending China’s Most Favored Nation status.
There has been a long-standing trade imbalance between China and the US. According to Chinese data, in 2018, the total bilateral trade volume between China and the US was $633.52 billion, with China exporting $478.42 billion to the US and importing $155.10 billion from the US, resulting in a trade surplus of $323.32 billion for China. In 2023, the total trade volume between China and the US reached $664.51 billion, with China importing $164.16 billion and exporting $500.29 billion, maintaining a trade surplus of $336.13 billion.
Although the CCP claims to retaliate “tit for tat” in words, in reality, they often fall short of doing so.
Since taking office in 2021, the Biden administration has maintained tariffs on Chinese imports. In May 2022, a review of the tariffs was initiated, initially set to conclude by the end of 2023 but later extended until the end of May this year. On April 19, US Trade Representative Dai Qi stated in an interview with Bloomberg TV that President Biden’s continuation of the Trump administration’s tariff policy towards China was strategical and viewed as an effective bargaining chip in dealing with Beijing.
Furthermore, the US is currently highly concerned about China’s industrial overcapacity. Officials like Janet Yellen and Blinken visited China, highlighting the importance of this issue. However, the CCP remains defiant, with the Foreign Ministry dismissing concerns about China’s industrial overcapacity impacting global markets as a false proposition, showing no intention of engaging in meaningful negotiations. This only increases the likelihood of the US engaging in another tariff war.
Following her return from China on April 16, US Treasury Secretary Yellen stated on CNN that the US is considering all options, including additional tariffs, to address China’s industrial overcapacity and prevent a flood of cheap goods into the American market.
On the same day, during a hearing on the 2024 trade agenda of the Biden administration held by the House Appropriations Committee, Dai Qi mentioned the readiness of the US to employ new trade tools, including actions like imposing new tariffs on China, to counter China’s non-market policies and practices. Earlier on February 23, the US Trade Representative’s Office submitted the “2023 China Compliance Report” to Congress, highlighting China’s continued challenges to the international trade rules set by the World Trade Organization. Dai Qi emphasized that even after 22 years of China’s membership in the WTO, China persists in using non-market practices that undermine the norm and principles embodied by the organization.
In remarks made on April 17 to the United Steelworkers in Pittsburgh, President Biden proposed tripling the tariffs on steel and aluminum imported from China, characterizing it as a response to unfair competition rather than legitimate market competition.
Also on April 17, the USTR announced the launch of a Section 301 investigation into China’s maritime, logistics, and shipbuilding industries. The revised Section 301 of the Trade Act of 1974 aims to eliminate foreign unfair practices affecting US businesses. The Trump administration previously initiated a tariff war against China based on the Section 301 investigation, starting from the investigation launch in August 2017 to the report release in March 2018, lasting just seven months. Following the report release, punitive tariffs were imposed on billions of dollars’ worth of Chinese imports within four months. Considering this precedent, the Section 301 investigation by the Biden administration is causing concern within the CCP.
Particularly leading up to the US election this year, with one of the main candidates, Trump, suggesting imposing tariffs on China exceeding 60% if elected, this has put pressure on Biden’s re-election campaign.
Therefore, the Biden administration’s preparation for a new round of tariff wars against China is not mere rhetoric but a concrete and continuous effort.
The current situation indicates that while the CCP may not desire a tariff war, its rigid and unyielding stance shows a lack of policy adaptability and capability, failing to learn from the lessons of the tariff wars with the Trump administration in 2018-2019.
The hasty introduction of the “Customs Law” may seem assertive, but in reality, it appears to be a misstep leading to more challenges for China.
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